Budgeting

The Budgeting module is a software tool used for preparing periodic and annual budgets for revenues, volumes, labor costs, and all other expense items. It also predicts business volumes and calculates labor and expense requirements for periodic forecasts or annual periods. Budgeting uses established cost standards to develop labor and expense projections that are linked directly to key business indicators (KBIs) such as occupied rooms, covers, and revenue dollars.

Budgeting allows Budgeting allows for better performance evaluation by using a flex budget model that accounts for actual business volumes. As the budgeted business volumes change, the budget automatically changes in the right proportion. Expenses are reflected in hours and dollars per unit rather than percentages, which makes them more accurateimproves their accuracy.

In addition, the flexible budgeting process provides you with a quantitative plan that projects revenues and costs for varying levels of activity. It helps you project and evaluate performance because it compares actual revenue and expenses with budgeted data, based on actual volumes. The flex budget also improves your 30-, 60-, and 90-day forecasts by accurately reflecting the impact of volume or rate revisions.

For reference purposes, LMS Budgeting stores Budgeting stores several versions of actuals, budgets, and forecasts. These references allow you to compare results over time, look at trends, and examine changes in performance to understand why variances have occurred.

With Budgeting allows , you to can do the following:

• Use the same labor standards that are used in the day-to-day operations.
• Create rolling forecasts and "what if" scenarios.
• Incorporate the quality standards that are key to customer service.
• Utilize hours, not percentages, when creating the annual and periodic budgets.
• Accurately and automatically adjust labor costs and expenses, to changes in business volumes.

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Phase 2: Creating an Annual Budget

Typically, you will create your annual in the third or fourth quarter of the current year, for the upcoming year.

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1. Lock annual budget.
2. Copy the budget into your rolling end-of-year forecast.
3. Perform your beginning-of-the-month tasks.
   • Revise your KBI forecast for the next 90 days.
   • Print your revised year-end forecast which uses prior period actuals combined with the revised forecast.
4. Perform your end-of-month tasks.
   • Import P&L actuals and KBI actuals to produce monthly variance reports.

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• Original budget (what you said in September, that you were going to do this period).
• EOY Forecast budget (what you said at the beginning of the month you would do).
• Actual budget (what you actually did).
• Flex budget (what you should have done based on volumes).

Your comparison table might look something like this:

1. In September, you said you were going to spend $3,000 and have $10,000 in revenue. (Original).
2. At the beginning of the month you changed your forecast to say that you would spend $3,300 and have $11,000 in revenue. (EOY Forecast).
3. You actually spent $3,281 and had $10,500 in revenue. (Actual).
4. When you apply 30% of what you budgeted for actual room revenue, it reveals that you spent $3,150 on $10,500 revenue (Flex).

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